The broad market indexes gained back the majority of the losses from Tuesday, but the confidence factor is still lagging. Even with the solid move to the upside yesterday volume was okay yet not impressive. Nice move back from the selling and I will take whatever upside the market has since I am long, but we need some confidence in the upside if we are going to test the January highs and beyond.

The Bernanke effect calmed investor anxiety which led to a loss Tuesday. What did he say? Nothing he hasn’t been saying all along concerning lower rates and the economic recovery still at a fragile stage. We need to keep giving away money in order to keep the economy going type thinking. Investors just needed to be reassured rates weren’t going higher any time soon – yet again.

Bank reform on the way? There is plenty of call for changes, but the progress has been painfully slow. The reason is obvious as the financials are still at a fragile stage of the recovery. However, the need to separate investing and banking remains a challenge. Despite the talk the banks were higher on the day moving back near the top of their respective range. Regional banks were up 2.3% and hitting against the top of the range. Watch the sector as it gains momentum. This could be the breakout opportunity?

Technology remains a mixed picture as with semiconductors are lagging again. The index led off the low and now has stalled. We need the push higher or it will be difficult for the broad markets to gain the necessary momentum.

Energy is seeing strength in the commodities and the stocks are struggling. The index is stalled at the 50 day moving average and well within the trading range. Watch for a break higher in the stocks. Oil services, refineries and conglomerates are sitting and waiting. The lack of upside in the sector is impacting the basic materials sector as well which has moved back to support at 233 on the index.

Economic data remained on the weak side with new homes sales off 11.2%. Tuesday the consumer confidence data was weak. Not what we needed to push the broad markets higher short term. Today we get the durable goods data and the weekly jobless claims. Hopefully the data will improve versus the last two days.

It is still a matter of confidence in the future growth of the US economy. Without a shift the bounce will be just that and we will go on to test the recent lows. Investors are driven by the day to day news and sentiment. Protect against the downside risk and remember cash is a sector. The returns aren’t so great currently, but the downside risk doesn’t exist either.

The the Daily Exchange video last night I covered some opportunities in the financial sector to consider if the move higher gains strength. Retail moved back to the top of the trading range and could break higher with the broad markets on a follow through to yesterday. Oil is moving higher, but energy stocks are lagging and worth putting on your watch list. Interest rates have moved lower again on the Bernanke promises and I am watching for another bottom or support point for the short side of that play. Point being, there are plenty of trading opportunities currently, but the longer term outlook is still too cloudy to play.

Remain disciplined with your portfolio and protect against the downside risk. Look for choppy news driven volatility to continue short term. The economic data is improving, but the confidence it is sustainable for the next the 3-4 quarters is still not in place. Be patient in taking positions and manage them according to your strategy and discipline.

Have a great day investing.